100 years of the German balance of payments A review from 1924 to 2024

In 2024, we will take the anniversary as an opportunity to reflect on the past every now and then. Travel back in time with us to see where the 1924 and 2024 balance of payments have a lot in common and where they differ (in some cases significantly).

In addition, an upcoming Monthly Reports will include an article exploring the past hundred years of the balance of payments.

The Balance of Payments Manual – Edition 3

Balance of Payments Manual 1950

Eleven years after the 2nd edition, the IMF revised the balance of payments manual again. The change has two main priorities:

First, the principles of the balance of payments are presented in more detail. The handbook thus shifts the focus of the handbook from a mere description of statistical requirements to an introduction to the external statistics itself. Even though this introduction will continue to be expanded in the next editions, the handbook is still not a textbook on external statistics, but primarily a reference book for experts.

Second, small changes were made to the tables in order to make the balance of payments results more comparable with other economic statistics that were only developed after the 2nd World War. This objective, too, will always accompany the development of the forthcoming editions of the manuals. Thus, the autonomous balance of payments is continually being adapted to (new) statistics in order to further promote economic policy analyses.

The Balance of Payments Manual – 3rd Edition 01.01.1961 | 19 MB, PDF

The Balance of Payments Manual – Edition 2

Balance of Payments Manual 1950

The data for the individual countries were very heterogeneous. Compiling comparable country results for the balance of payments yearbook was very difficult. The findings from this work have led to a further revision of the balance of payments manual after just two years.

In addition to the main balance of payments table, additional tables have been added from which the main table can be derived. The IMF wanted to use the more detailed information to gain a better understanding of the differences and thus to better assess how comparable the data between countries are.

For government debt, a very detailed table was introduced, which contained the stock at the beginning and end of the period, as well as the reasons for the changes in stock. This scheme will be further developed into a fully integrated international investment position by the 7th edition.

In addition to these measures to improve comparability, there was also a major conceptual change. Undistributed profits have now been taken into account in the balance of payments in such a way that they are notoriously distributed and, at the same time, reinvested in the enterprise. This is still recorded today under “Reinvested earnings”.

The Balance of Payments Manual – 2nd Edition 01.01.1950 | 10 MB, PDF

The Balance of Payments Manual 1st Edition

Balance of Payments Manual 1948

After the end of World War 2, the United Nations took over the tasks of the League of Nations. The task of setting standards and publishing balance of payments was entrusted to the newly established International Monetary Fund (IMF). To this day, a key task of the IMF is to provide financial assistance to countries with serious balance of payments problems.

The 1st edition of the Balance of Payments Manual is fundamentally based on the developments of the League of Nations. A provisional form of the manual was adopted at a specialist conference in September 1947 with representatives from around 30 countries and international organisations. The structure is very similar to the League of Nations’ “Letter of Requirements”. However, a major innovation is that, in addition to extensive tables, the conceptual foundations of the balance of payments are presented centrally at the very beginning.

The Balance of Payments Manual – 1st Edition 01.01.1948 | 4 MB, PDF

Further Development of Concepts

The concepts of the balance of payments have been continuously refined. For this purpose, a subcommittee was set up at the League of Nations in 1938, but it did not take up its work as a result of the outbreak of World War 2. It was convened again in 1945 and the members sent out a relatively short report as early as December 1945. Although the report is short, it should determine the evolution of the balance of payments over the next 30 years. The recommendation to rename the term “balance of payments” to “International Transaction Account” (unfortunately?) not implemented.

League of Nations – Concepts of the balance of payments


The first international framework for the balance of payments

The League of Nations used to send empty tables along with explanatory notes to countries on a regular basis in order to compile the results of the national balances of payments. The notes were around 12 pages long and were intended to make it as easy as possible to compare the results reported by the individual countries. This could therefore be considered the first international framework for the balance of payments. In many ways, the procedure was already very similar to the International Monetary Fund’s current conceptual requirements:

  • Imports were to be recorded at cost, insurance and freight (c.i.f.) values, i.e. as valued at the border of the exporting country. The effects on the transport account were already explained. The c.i.f. valuation of imports was to undergo a critical review in the new edition of the Balance of Payments Manual but would remain unchanged until further notice.
  • In the goods account, the necessary adjustments to foreign trade, which are still carried out in the same way today, were explained.
  • The services listed already overlapped very closely with today’s services account – with the exception of IT services.
  • The effects of migration on the balance of payments were dealt with extensively. These effects have been treated differently since 2009 (no transaction).
  • The financial account distinguished between short and long-term transactions. It did not focus on today’s functional categories. However, back then, it was already specified that, for repayments, a distinction was to be made between payments of interest and payments of principal, and that fluctuations in value were not part of the balance of payments.

United Nations Archives at Geneva

Request for a statement of the balance of payments Circular letter 220, December 1937

How the official German balance of payments came into being

Die deutsche Zahlungsbilanz 1930

On 15 July 1926, a working group in Germany was tasked with setting up a balance of payments, in keeping with the resolution of the League of Nations. In 1930, the working group published its results, starting with the 1924 reporting year. It largely applied the League of Nations schema. In some areas, the breakdowns were expanded to accommodate features idiosyncratic to Germany without jeopardising comparability with other countries. This is still standard practice today. 

The current standards seek to ensure comparability by already including extensions to the “core balance of payments” as possible additional components. At that time, however, Germany chose its own approach to the treatment of banknotes, as the working group regarded banknotes as being closer in nature to loans than to (monetary) gold. This interpretation ended up prevailing internationally. Today, banknotes and short-term loans are reported together in the balance of payments (under the item “currency and deposits”).

Die deutsche Zahlungsbilanz 1930

“Memorandum on Balance of Payments and foreign trade balances”

Further to the resolution of 1922, the League of Nations sent governments a series of empty tables, including instructions for completing them, and requested that these be filled out and returned. 

We regard these instructions as the first international recommendation for compiling balance of payments statistics, even though very few countries initially followed these instructions but instead sent statistics compiled based on national systems that were in place. The League of Nations converted these submissions insofar as it was possible into the appropriate formats. 

In 1924, the first report was published with statistics for 13 countries. Germany makes its first appearance in these reports in 1926 with statistics as of 1924.

United Nations Archives at Geneva


Example response DE 1933

Resolution of the League of Nations

The phrase “Balance of Payments” was already used in the 14th century. 

Sir James Steuart used it 1767 probably for the first time close to its modern sense. 

In the 19th century, Great Britain and the United States of America made the first attempts to compile a balance of payments statistics. After the Great War the economic order changed dramatically and it lead to economic upheavals between countries. Therefore, the League of Nations ordered in its 3rd Assembly at 28th September 1922 the collection and publication of national balance of payments statistics. 

“It hopes that the study of various questions connected with the stabilisation of currencies, and in particular that of the foreign trade balance and balance of payment of various States, which is an essential element of the problem, will be actively pressed forward so as to lead to the publication of reports which will throw light on this question, which is one of urgent importance.”

Resolution of the Third Assembly, 1922
League of Nations

This was the starting point for the systematic international development of concepts and methods for balance of payments statistics. 

United Nations Archives at Geneva

United Nations Archives at Geneva Resolutions of the Third Assembly, 1922

The first German balance of payments

100 Jahre Zahlungsbilanz

The first comprehensive balance of payments for Germany was drawn up in 1924. The high reparation payments Germany was obliged to make after the end of the First World War led to distortions in the international economic exchange. This made it necessary to analyse other aspects of the international economic exchange besides the trade in goods.